Once considered the safest borrowers, governments now face scrutiny more familiar to corporates. Fiscal deficits, political upheaval and tighter monetary policy have pushed long-dated gilt yields above 5.5% – their highest levels since the late 1990s.
The rise reflects more than just inflation and monetary policy. Over the past decade, leverage has shifted away from consumers and corporates and onto government balance sheets. While company debt levels have fallen and household savings have improved, public borrowing has expanded sharply, leaving fiscal credibility once again at the centre of bond pricing.
According to Stephen Snowden, Head of Fixed Income at Artemis, this shift means investors are demanding greater compensation for holding sovereign risk. The distinction between "risk-free" and "risky" assets, he argues, is narrowing – and that could have meaningful implications for portfolio construction in the years ahead.
Read the full article on Investment Week's Fixed Income Portal.
